International trade is Hong Kong's most important economic activity. Its government policy towards trade reflects Hong Kong's status as a center of free trade. This policy contains minimum restrictions and allows the market forces to regulate exports and imports. It therefore proscribes protective measures (e.g., tariffs and quotas) and subsidies as a means for avoiding balance-of-trade deficits.
Hong Kong is a major exporter and importer of goods and services in Asia. It exported US$175.8 billion in goods and US$34 billion in services in 1998. In the same year the value of its imports was US$183.7 billion for goods and US$11.7 billion for services. As a result of the financial crisis of 1997-98, the value of its international trade decreased in 1999 when it exported US$174.7 billion worth of goods and US$35.7 billion worth of services while importing US$177.9 billion in goods and US$13.2 billion in services.
Exports consist of goods produced in Hong Kong (domestic exports) and those produced in Hong Kong-owned industries in China (re-exports). Re-exporting has become the largest component of Hong Kong's trade since the early 1980s, when its large and labor-intensive industries began to move to mainland China. For example, between 1986 and 1996, the volume of re-exports and domestic exports rose by about 700 percent and 17.3 percent, respectively. The small contribution of domestic exports to total exports was evident in 1999, for instance, when the total value of exports of goods was US$174.7 billion, of which the share of domestic exports was only US$21.9 billion. Because of the growing value of re-exports, Hong Kong has experienced a constant balance-of-trade deficit since the 1980s. As recent examples, the deficit was
|Trade (expressed in billions of US$): Hong Kong|
|SOURCE: International Monetary Fund. International Financial Statistics Yearbook 1999.|
US$17.298 billion in 1997, US$7.833 billion in 1998, and US$3.158 billion in 1999.
Consumer goods and light manufactures are the major exports of Hong Kong. In order of importance, they include apparel and clothing, electrical machinery and apparatus, textile yarn and fabric, office machinery and data processing equipment, watches and clocks, telecommunications equipment, jewelry, printed matter, plastics, toys, games, and sports goods. The major re-exports consist of consumer goods, raw materials, metals (iron and steel), semi-manufactures, capital goods , foodstuffs, and fuels. Hong Kong's major imports include consumer goods, raw materials, semi-manufactures, capital goods, foodstuffs, and fuels.
Hong Kong has lost most of its manufacturing capability since reunification with mainland China. Its most important domestic export industries are garments, textiles, and clothing, which accounted for 49 percent of its 1999 domestic exports. The Hong Kong government has tried to diversify this sector by encouraging the high-tech industry, which has expanded over the last decade, but its share of domestic exports is still small. For example, telecommunications equipment accounted for 2.2 percent of the domestic exports in 1999, valued at US$486 million.
The major trading partners of Hong Kong are China, the United States, Japan, the United Kingdom, and Taiwan. Its main export destinations in 1999 were China (33.4 percent), the United States (23.8 percent), Japan (5.4 percent), and the UK (4.1 percent). In the same year, its main sources of import were China (43.6 percent), Japan (11.7 percent), Taiwan (7.2 percent), and the United States (7.1 percent). Because of re-exports, China has become the largest trading partner of Hong Kong.